Zynga announces weak earnings, world experiences schadenfreude

Places blame on Facebook changes

Farmville-maker Zynga has announced a huge loss of $108 million (£70m) for the first half of 2012, a drop it blames partly on Facebook.

It's not all bad news - although sales of virtual goods in Farmville and the like fell during the period, the total number of players on Facebook actually increased.

But that didn't stop the social gaming company's shares dropping 40 per cent in value when the results were revealed, while Facebook investors also quaked in the wake of the announcement.

Shares in Facebook fell because the two companies have a close revenue-sharing partnership – in fact, Facebook is pretty reliant on Zynga which accounts for around 15 per cent of its income.

A poor harvest

Although Zynga conceded that delays to new games and its high expectations for OMGPOP and Draw Something (which it bought for $200 million just before everyone stopped playing it) both contributed to its decline, it lays the lion's share of the blame at Facebook's door.

Zynga's press release speaks of "a more challenging environment on the Facebook web platform" and warns that targets may be missed because of "our relationship with Facebook or changes in the Facebook platform", among other things.

Zynga's COO John Schappert said, "Facebook made a number of changes in the quarter. These changes favoured new games. Our users did not remain as engaged and did not come back as often."

Facebook's quarterly results will be announced later today for the first time since it became a public company in May.